History

Mail order catalog

Richard Warren Sears was born in Stewartville, Minnesota in 1863 to a wealthy family, which moved to nearby Spring Valley.[5] In 1879, Sears' father died shortly after losing the family fortune in a speculative stock deal.[5] Sears moved across the state to work as a railroad station agent in North Redwood, as well as in Minneapolis. While in North Redwood, a jeweler received an impressive shipment of watches which were unwanted. Sears purchased them, then sold the watches at a low price to the station agents and made a considerable profit.

In Minneapolis, he started a mail order watch business in 1886, calling it "R.W. Sears Watch Company." Within the first year he met Alvah C Roebuck, a watch repairman. The next year, they relocated the business to Chicago. In 1887, R.W. Sears Watch Company published Richard Sears' first mail-order catalog - in this case, offering watches, diamonds, and jewelry. In 1889, Sears sold his business for $100,000 ($2.7 million today) and relocated to Iowa, intending to be a rural banker.[6]

Restless, Sears returned to Chicago in 1892 and established a new mail-order firm, again selling watches and jewelry, with Roebuck as his partner, operating as the A. C. Roebuck watch company. In 1893, they renamed the company to Sears, Roebuck & Company and began to diversify the product lines offered in their catalogs. Before the Sears catalog, farmers near small rural towns usually purchased supplies - often at high prices and on credit - from local general stores with narrow selections of goods. Prices were negotiated, and relied on the storekeeper's estimate of a customer's creditworthiness. Sears took advantage of this by publishing catalogs offering customers a wider selection of products at clearly stated prices. By 1894, the Sears catalog had grown to 322 pages, featuring sewing machines, bicycles, sporting goods, automobiles (later produced, from 1905 to 1915, by Lincoln Motor Car Works of Chicago, no relation to the current Ford line),[7] and a host of other new items. By 1895, the company was producing a 532-page catalog. Sales were greater than $400,000 ($10.9 million today) in 1893 and more than $750,000 ($22.1 million today) two years later.[8] By 1896, dolls, stoves and groceries had been added to the catalog.

Despite the strong and growing sales, the national Panic of 1893 led to a full scale recession, causing a cash squeeze and large quantities of unsold merchandise by 1895. Roebuck decided to quit, returning later in a publicity role. Sears offered Roebuck's half of the company to Chicago businessman Aaron Nusbaum, who in turn brought in his brother-in-law Julius Rosenwald, to whom Sears owed money. In August 1895, they bought Roebuck's half of the company for $75,000 ($2.2 million today). The company was reincorporated in Illinois with a capital stock of $150,000 ($4.4 million today) in August 1895. The 1895 transaction was handled by Albert Henry Loeb of the Chicago Law Firm of Loeb & Adler (now known as Arnstein & Lehr, LLP). Copies of the transaction documents are now displayed on the walls of the law firm.[9]

Sears and Rosenwald got along well with each other, but not with Nusbaum. The pair bought Nusbaum out for $1.3 million in 1903 ($35.4 million today).[10] Rosenwald brought to the mail order firm a rational management philosophy and diversified product lines: dry goods, consumer durables, drugs, hardware, furniture, and nearly anything else a farm household could desire. Sales continued to grow rapidly, and the prosperity of the company and their vision for greater expansion led Sears and Rosenwald to take the company public in 1906, with a stock placement of $40 million ($1.1 billion today). However, they had to incorporate a new company in order to bring the operation public. Sears and Rosenwald established Sears, Roebuck and Company (legal name Sears, Roebuck and Co.) in the state of New York and effectively replaced the original company.[11] The current company inherits the history of the old company, celebrating the original 1892 incorporation, rather than the 1906 revision, as the start of the company.

Sears' successful 1906 initial public offering (IPO) marks the first major retail IPO in American financial history and represented a coming of age, financially, of the consumer sector.[12]

In 1906, Sears opened its catalog plant and the Sears Merchandise Building Tower in Chicago's West Side.[13] The building was the anchor of what would become the massive 40-acre (16 ha) Sears, Roebuck and Company Complex of offices, laboratories and mail-order operations at Homan Avenue and Arthington Street. The complex served as corporate headquarters until 1973, when the Sears Tower was completed, and served as the base of the mail order catalog business until 1993.

By 1907, under Rosenwald's leadership as Vice President and Treasurer, annual sales of the company climbed to roughly $50 million ($1.3 billion today). Sears resigned the presidency in 1908 due to declining health, with Rosenwald named president and chairman of the board and taking on full control.[14]

The company was badly hurt during 1919-21 as a severe depression hit the nation's farms after farmers had overexpanded their holdings. To bail out the company, Rosenwald pledged $21 million in 1921 ($0.3 billion today) of his personal wealth.[15]

By 1922, Sears had regained financial stability. Rosenwald oversaw the design and construction of the firm's first department store, built on land within the Sears, Roebuck and Company Complex. The store opened in 1925. In 1924, Rosenwald resigned the presidency, but remained as chairman until his death in 1932; his goal was to devote more time to philanthropy.[16]

In 1933, Sears issued the first of its famous Christmas catalogs known as the "Sears Wishbook", a catalog featuring toys and gifts, separate from the annual Christmas Catalog. From 1908 to 1940, the catalog even included ready-to-assemble kit houses.[17]

By that time, the Sears catalog had long been known in the industry as "the Consumers' Bible".[] Novelists and story writers often portrayed the importance of the catalog in the emotional lives of rural folk. The catalog also entered the language, particularly of rural dwellers, as a euphemism for toilet paper, as its pages could be torn out and used as such.[18] For children and their parents, the catalog was eagerly flipped through, not always a question of purchasing but of dreaming; they made up stories about the lives of the models on the pages. The catalog was a means of entertainment, though much of its magic wore off with the passing of childhood.[19]

Retail stores and diversification

Sears Tower

The mail order market was based on rural America, with a slow-growing population and far less spending power than urban America. Rosenwald decided to shift emphasis to urban America, and brought in Robert E. Wood to take charge. The first Sears retail stores were opened in conjunction with the company's mail order offices, typically in working-class neighborhoods far from the main shopping center. Sears was a pioneer in creating department stores that catered to men as well as women, especially with lines of hardware and building materials. It deemphasized the latest fashions in favor of practicality and durability, and allowed customers to select goods without the aid of a clerk. Its stores were oriented to motorists--set apart from existing business districts amid residential areas occupied by their target audience; had ample, free, off-street parking; and communicated a clear corporate identity. In the 1930s, the company designed fully air-conditioned, "windowless" stores whose layout was driven wholly by merchandising concerns.[20]

In 1974, Sears completed the 110-story Sears Tower in Chicago, becoming the world's tallest building, a title it took from the former World Trade Center towers in New York. Sears moved to the new Prairie Stone Business Park in Hoffman Estates, Illinois, between 1993 and 1995.[21] The Sears Centre is a 10,001-seat multi-purpose arena located in Hoffman Estates adjacent to the Prairie Stone campus.[22] Even though its naming rights to the building expired in 2003 it remained the Sears Tower through early 2009. In March 2009 London-based insurer Willis Group Holdings, Ltd., was given the building's naming rights to entice the occupancy of the building. The official renaming as the Willis Tower took place on Thursday, July 16, 2009, during a public ceremony hosted by Willis Group Holdings.[23]

In the 1990s, the company began divesting itself of many non-retail entities, which were detrimental to the company's bottom line. Sears spun off its financial services arm which included brokerage business Dean Witter Reynolds and Discover Card. It sold its mall building subsidiary Homart to General Growth Properties in 1995.[24] Sears later acquired hardware chain Orchard Supply Hardware in 1996 and started home improvement store The Great Indoors in 1997.[25]

Decline and Sears Holdings

In 1993, Sears terminated its famous general merchandise catalog because of sinking sales and profits, and in 1997 sold 85% of its Mexico affiliate to Grupo Carso. Sears Holdings continues to produce specialty catalogs and reintroduced a smaller version of the Holiday Wish Book in 2007. In 2003, Sears sold its retail credit card operation to Citibank.[26] The remaining card operations were sold to JPMorgan Chase in August 2005. In 2003, Sears opened a new concept store called Sears Grand. Sears Grand stores carry everything that a regular Sears carries, and more. Sears Grand stores are about 175,000 to 225,000 square feet (16,300 to 20,900 m2).

On November 17, 2004, Sears announced it was being acquired by the management of Kmart Holding Corporation (company that owns Kmart) for $11 billion after Kmart completed its bankruptcy (USA Today Nov. 17, 2004). As a part of the acquisition, Kmart Holding Corporation along with Kmart was transferred to the new Sears Holdings Corporation and Sears was purchased by the new Sears Holdings. The new company started trading on the NASDAQ stock exchange, Sears sold its single letter ticker symbol 'S' it had held since 1910 to Sprint.[27] The new corporation announced that it would continue to operate stores under both the Sears and Kmart brands. In 2005, the company began renovating some Kmart stores and converting them to the Sears Essentials format, only to change them later to Sears Grands.[28]

The combined company's profits peaked at $1.5 billion in 2006, then dwindled to nearly nothing by 2010. From 2011 to 2016 the company lost $10.4 billion. In 2014 its total debt ($4.2 billion at the end of January 2017) surpassed its market cap ($974.1 million as of March 21).[29]

Sears spent much of 2014 and 2015 selling off portions of its balance sheet; namely Lands' End and its stake in Sears Canada. Sears Canada was one of the biggest e-commerce players in Canada, with CAN$505 million in sales in 2015--more than Walmart and others who have begun pushing aggressively into online sales, such as Canadian Tire.[30] Sears stated that the company was looking to focus on becoming a more tech-driven retailer. Sears' CEO and top shareholder said the sell-off of key assets in the last year had given the retailer the money it needs to speed up its transformation.[30] As of 2015, Sears Holdings had lost a total of US$7 billion in the last four years. In part, the retailer was trying to curb losses by using a loyalty program called Shop Your Way.[30] Sears believed the membership scheme would be a long-term play for the company, and it would enhance repeat business and customer loyalty.[30]

Seritage Growth Properties is the REIT spinoff of some of the holding company's Sears and Kmart stores. The REIT announced in October 2016 that it was terminating 17 store leases. All of the locations are associated with Kmart locations.[31] Also in October 2016, Moody's Investor Services downgraded Sears to speculative grade liquidity rating. The speculative grade liquidity means that Sears is expected to have to rely on external financing and monetization of its alternative assets according to Moody's VP Christina Boni.[31]

In late 2016 and early 2017, some significant steps were taken by Edward Lampert, president, chief executive officer and top shareholder of Sears Holding Corp. Lampert, with personal assets estimated at US$2 billion, is also the founder and manager of the hedge fund ESL Investments Inc.[32] He provided an additional loan of US$500 million to the company and said he would provide letters of credit to Sears for additional amounts, reportedly totaling US$200 million and possibly increasing to a half billion dollars in the future.[33]

Lampert also concluded an arrangement that sold the Craftsman brand to Stanley Black & Decker Inc. for approximately US$900 million.[34] During this period, the company also announced that it would close 150 stores (109 Kmart and 41 Sears outlets), in an attempt to cut its losses after a decline in sales of 12 to 13 percent during the holiday shopping season and the largest quarterly loss since 2013. Matt McGinley, an analyst at Evercore ISI, stated, "In the long run, the cash isn't likely to change the company's course. ... I don't think there is any viable path to any sort of profitability."[35]

In February 2017, Sears announced a restructuring plan that is hoped to cut costs by US$1 billion via selling more stores, cutting jobs and selling brands.[36] During the second quarter of 2017, 42 Sears stores in 40 states closed.[37] Later on Sears announced that it closed an additional 12 stores.[38] In July 2017, Sears announced it would close another 43 stores (8 Sears and 35 Kmart stores). Those closures are in addition to the previously announced closures.[39]

Since 2010, Sears has gone from more than 3,500 physical stores to 695 US stores.[40] Sales at Sears stores dropped 10.3 percent in the final quarter of 2016 when compared to the same period in 2015.[41]

In October 2017, Sears and appliance manufacturer Whirlpool Corporation reportedly ended their 101-year old association that had allowed Whirlpool appliances to be sold at Sears stores and, later, at Kmart. The companies reportedly were unable to come to an agreement on pricing issues.[42]

In November 2017, Sears announced they were closing 18 Sears stores and 45 Kmart stores. The stores would be closing by January 2018 bringing the store count to 680 Sears stores.

In January 2018, Sears announced they would be closing 39 Sears stores and 64 Kmart stores. These stores would be closing by April 2018, leaving Sears Holdings with 555 stores.[43] According to MSN money, as this rate, Sears along with sister company Kmart, has an extremely high chance of disappearing and going defunct in 2018, and that 2017 will have marked its final holiday season as an independent brand. [44]

Subsidiaries

Current

A&E Factory Service is the newest name for Sears' longstanding on-site repair service, servicing larger items such as home appliances, electronics, and garden equipment. The A&E brand name was purchased from Montgomery Ward, which used it for their home service unit, and is a joint venture held by Whirlpool and Sears Holdings.[45] A&E Factory Service is a network of mobile service vans with a long history of performing appliance repairs.[46]

Sears (Full-Line) is a chain of department stores that are usually located in shopping malls, however, some freestanding stores exist; they carry clothing, jewelry, home appliances, household hardware, lawn and garden supplies, lawn mowers, paint, sporting goods, automobile repair, office supplies, electronics and school supplies. Sears stores are usually multi-level, averaging 139,000 sq ft (12,900 m2).[47] As of July 29, 2017, there were 619 full-size Sears stores[48] in the United States. There are also 94 in Mexico.[49][not in citation given]

Sears Grand is a chain of hypermarkets typically located away from shopping malls (with the exception of Gurnee Mills, Gurnee, Illinois, and formerly Pittsburgh Mills, Tarentum, Pennsylvania, which closed in January 2015). Many Sears Grand locations are retrofit remodels of existing Kmart supercenter stores. They carry everything a Sears department store carries, plus health and beauty products, a pharmacy, toys, baby care, cleaning supplies, home décor, pet food, cards and party supplies, books, magazines, music, Little Caesars Pizza Station, movies, and a selection of groceries which is limited mostly to dry goods. Sears Grand stores range from 165,000 to 210,000 square feet (15,300 to 19,500 m2).[50] The first Sears Grand opened at Jordan Landing in West Jordan, Utah in 2003. At 225,000 square feet (20,900 m2), the Jordan Landing store is currently the largest in the chain.

Sears Home Services is a division of Sears that specializes in appliance repair, lawn and garden services, HVAC service, as well as most in home services. Sears Home Services can also do repair on small appliances in-store.

Sears Optical is a chain of off-mall optical shops which carries all the same products and services as the optical department at regular Sears stores.

Sears PartsDirect is a chain of lawn & garden equipment and appliance parts stores. Some locations, branded as Sears Parts and Repair Centers, feature a carry-in point for customers to bring-in merchandise which needs to be repaired, either in or out of warranty.

Sears Portrait Studio is a full service portrait studio with locations in Sears stores and formerly standalone locations as well. It was run by CPI Corporation, until all Sears Portrait Studios ceased operations on April 6, 2013. CPI Corporation, in a statement on its website, said it closed all of its U.S. studios "after many years of providing family portrait photography." The St. Louis-based company didn't explain the hasty closure, and calls to CPI went unanswered. However, the company has struggled financially, hurt by the rise of digital photography. Sears Portrait Studio was later revived in August 2016 in a few in-store locations through an affiliation with Picture People.

Former

Sears Outlet is an outlet version of Sears department stores located in various retail locations across the United States. The stores carry new, one-of-a-kind, out of carton, discontinued, used, scratched and dented merchandise at 20-60% off regular retail price. While a wide variety of products are available, appliances make up a large majority of available merchandise. Sears Outlet stores were once known as Sears Surplus. Many former Kmarts have been converted to serve as Sears Outlets, though these often take up less than half the floorspace. Each store, on average, is larger than 18,000 square feet in size.[52] Sears Outlet was part of a spin-off with Sears Hometown Stores and Sears Appliance and Hardware Stores to become Sears Hometown and Outlet Stores in September 2012.[53]Sears Canada's 11 Outlet stores were not spun off from the corporately-owned full-line stores in Canada. 6 stores remained open until June 2017, when it was announced they would be closing while Sears Canada was under bankruptcy. Ultimately, the company closed as a whole in January 2018.

Sears Appliance & Hardware is a chain of hardware stores that carry the whole line of Sears hardware and are usually free-standing. More than 110 Sears Appliance & Hardware stores averaging 28,000 square feet (2,600 m2) serve customers nationwide. Stores were expanded to include Sears' full line of appliances in 2005. Sears Hometown and Outlet Stores took on Sears Appliance & Hardware in a Spin-off from Sears Holdings in 2012.[54]

Sears Hometown Stores (formerly known as Sears Authorized Dealer Stores) is part of the retail operation of Sears Holdings and is a small-store (averaging 8,500 square feet) version of Sears full-line department stores. Sears Hometown Stores, established in 1993, is a franchise formula The stores are located away from shopping malls and serve local communities across the United States and Puerto Rico.[55] Sears Hometown Stores was part of a spin-off with Sears Outlet and Sears Appliance and Hardware in September 2012.[53]

Sears Home Appliance Showrooms is a store that offers home appliances and related services in-store. The stores have an internet kiosk where customers are able to view similar products, price match, and order products not available in the store. primarily located in strip malls and centers of metropolitan areas. Averaging 5,000 square feet with a primarily appliance showroom design. These stores carry Kenmore and other national brands of home appliances.

Lands' End, Is a "store within a store" inside approximately 227 Sears domestic full-line locations. Averaging 7,700 square feet and offering Lands' End clothing and branded products. Sears Holdings prior to the spin off, operated fourteen Lands' End stores that exclusively carry Lands' End clothing and various fashion accessories, footwear and home goods. These stores which average 9,300 square feet are located separate from Sears department stores, usually in outlet malls and regular malls.[56] Sears officially spun off Lands' End in April 2014 amid continuing financial distress, including a US$1.4 billion loss in 2013.[57] Lands' End is now a publicly traded clothing and home-goods producer and retailer, specializing in kids clothing, uniforms, and customized workplace products.[58]

Sears Essentials was a chain of discount stores that were common retrofit remodels of existing Kmart stores. Their product lines were similar to that of Sears Grand stores. In 2006, Sears dropped the brand as it tried to turn Kmart stores into free standing Sears stores. Most of 50 buildings bearing its name were turned into Sears Grand Stores or reverted to Kmarts.[59]

National Tire and Battery(NTB) & National Tire Warehouse(NTW) is an American brand of auto service centers. It was formerly owned by Sears until it was spun off in 2003. Sears created the brand in 1997 by consolidating the Tire America (TA) and National Tire Warehouse (NTW) brands, adding the "B" to include its DieHard brand of batteries.[60] Sears sold the brand, which consisted mostly of stores set apart from its name brand stores, in 2003 to TBC Corporation. A Sears spokesman said "Because of the separate branding and the lack of proximity to our retail operations, we weren't able to drive growth like a TBC could".[61] The chain of 226 stores was reported to have brought in $425 million in revenue and $60 million in profit in 2002.[61]

Sears Brand Central was an electronics store. The appliances departments in Sears are now known and referred to internally as Brand Central, although they are not marketed to consumers as such, except for a few locations in Puerto Rico.

Sears Catalog Sales Stores were located in small towns. These stores were very small, even smaller than Sears' current Hometown Dealer stores. At catalog stores, some items could be ordered from the floor, such as appliances; other items could be ordered from catalogs at the store. These stores were often placed in rural markets which were far from full-line Sears stores, allowing for customers to purchase Sears products more easily. These stores were closed in 1993 when Sears closed its catalog business.

Sears Authorized Catalog Sales Merchant was an independent business person who provided many of the same services as the Sears Catalog Sales Store. Similar operations were also found in Canada with Sears Canada as Sears Pickup Location or Sears Catalogue Sales Merchant.

Sears Appliance Stores were small stores usually between 7,000 and 10,000 square feet[62]. Sears Appliance Stores displayed and sold (at Retail Store prices) appliances, carpeting, etc. and, in addition, provided a catalog sales department through which catalog items could be ordered. Sears Holdings has opened a Sears Appliances store in Colorado in 2016 with plans to add more throughout the country.

Sears Rent-a-Car was a car and truck rental chain formed in a mid-1970s joint venture with Budget. It was sold to Avis in 2002.

Sears HomeLife was a chain of furniture stores owned by Sears. The concept was introduced at a mall in Fresno, California in 1989, followed by a stand-alone store in Madison, Wisconsin.[63] Sears HomeLife averaged 20,000 to 40,000 square feet, featured dark ceilings, theatrical lighting and an expanded array of furniture and accessories. These stores are designed to be much larger than the typical in-store Sears furniture department, which averages around 7,800 square feet. Sears opened Homelife stores as stores-in-a-store to replace the exist furniture departments within large full-line Sears stores. Other Sears HomeLifes were opened as free-standing locations.[64] Sears sold the stores to Citicorp Venture in 1999, who changed the chain's name to just "HomeLife". They opened more locations, some inside large Sears stores or near the store depending on space available. HomeLife closed its last stores in 2001.[65] In Puerto Rico, a few HomeLife locations are still present.

Sears Neighborhood was a chain similar to Sears Hometown stores, except that Neighborhood stores were located in urban markets. These stores were also independently owned and operated. The concept was introduced in Atlanta in 1998, and another similar store was located in Cincinnati.[66][67] The Neighborhood stores closed in the early 2000s.

The Great Indoors was a chain of free-standing home decor stores that carry high-end home appliances, bedding, and kitchen and bath fixtures. The Great Indoors also offered custom kitchen and bathroom design services. Stores were approximately 140,000 square feet each. Nearly 300 employees were hired for each store.[68] Sears Holdings announced the closing of all remaining stores in 2012.

Orchard Supply Hardware is a chain of free-standing hardware stores, averaging 28,000 square feet. Stores carry home repair, hardware products and lawn and garden supplies. It was spun off from Sears in January 2012.[69]

Employee relations

Sears has struggled with employee relations. One notable example was the shift in 1992 from an hourly wage based on longevity to a base wage (usually between US$3.50 and US$6 per hour) and commissions ranging from 0.5% to 11%. Sears claimed the new base wage, often constituting a substantial (up to 40%) cut in pay, was done "to be successful in this highly competitive environment".[97]

In early October 2007, Sears cut commission rates for employees in select departments to anywhere from 0.5% to 4% but equalized the base wage across all Home Improvement and Electronics departments. In 2011, commission rates on non-base items were cut by 2% in the electronics department. In late 2009, the commission on sales of "base items" from the electronic department was cut to 1%. As of 2017, appliances is the only remaining department where compensation is based entirely on commission. Other departments give a base pay plus commission. In many stores, jewelry department associates receive a low base salary with 1% commission on their sales.

^This Week in Consumer Electronics, Whirlpool Bears First Fruits Of Maytag Merger At Home Depot, September 10, 2006.

^Yard and Garden, Filling the gap: now that home centers are "servicing what they sell," where do dealers fit into this rapidly changing retail channel?; Profitably running your service department, March 2005.